# accounting equation, the

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accounting equation, the
*Assets = liabilities + *capital. Under the conventions of *double entry bookkeeping, each accounting transaction has at least one *debit entry and at least one *credit entry of equal value. At any moment, the mathematical integrity of bookkeeping can be established by reference to the accuracy of the accounting (or *balance sheet) equation. In the balance sheet, assets are recorded through debit entries, and liabilities and capital (or *equity) through credit entries. While the accounting equation shows that a balance sheet balances, it does not indicate whether individual transactions have been booked to the appropriate *accounts.

Auditor's dictionary. 2014.

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